General Motors, China’s BYD to invest over $2.0bn in EVs at Brazilian facilities

SAO PAULO (ICIS)–General Motors is to invest Brazilian reais (R) 7.0bn ($1.4bn) in 2024-2028 at its facilities in the country to implement a “complete renewal” of its vehicle portfolio focusing on production of electric vehicles (EVs), the US automotive major said this week.

Meanwhile, China’s EV major BYD also announced this week it would invest R3.0bn at its facilities in Camacari, in the state of Bahia. The company purchased the plant from Ford in 2023.

The Brazilian government approved at the end of 2023 the so-called Mover program, which envisages tax breaks and incentives for greener mobility.

Both GM and BYD’s announcements were made after weeks of talks with the government, although details of the agreements signed have not yet been made public.

The automotive boost this week will have been music to the ears of both automotive executives in Brazil and the government presided by Luiz Inacio Lula da Silva, in office since January 2023.

For the former, the announcements could be a catalyst for further growth in EVs, a sector in which Brazilian producers are lagging versus other big producing countries.

In the past decade, those executives have presided over a sharp fall in output, down the peak of nearly 3.5m units/year in the early 2010s to just over 2.3m units produced in 2023.

Brazil’s automotive exporting prowess to the rest of Latin America has dwindled on the back of fierce competition from overseas producers, mainly Chinese.

For the government, the announcements will be a relief after the Lula Administration has struggled to show any sign of a revival in manufacturing, a key promise to its core electorate. Manufacturing stayed in contraction territory for most of 2023.

President Luiz Inacio Lula da Silva made sure this week to capitalize on both announcements, which were made in Brasilia’s Planalto presidential palace.

Earlier in the week, he also presented a 10-year industrial policy plan envisaging incentives for green investments to the tune of R300bn. The Mover program is part of that plan.

TURNAROUND
In GM’s case, the announcement this week is a remarkable turn of events after the company and some of its workers in Brazil were involved in a legal dispute after GM implemented 1,200 redundancies without prior consultation with trade unions.

A judge disregarded the redundancies and ordered GM to rehire all workers.

GM is a key automotive producer in Brazil. The company operates three production facilities in the state of Sao Paulo: Sao Jose de Campos, Sao Caetano do Sul, and Mogi das Cruzes.

The company said the investments would also include research and development (R&D) of “innovative and customized” products for the Brazilian market as well as the “creation of new” businesses.

“The factories will also receive developments that will make them even more modern, agile, and sustainable,” said GM.

A large part of Brazil’s current vehicle fleet can also run on biodiesel, an element which has greatly helped reduced the country’s emissions from the transport sector but has also made producers rest in their laurels in terms of EV production.

“Brazil is strategic for GM’s global business expansion plan. In addition to being a vehicle export hub for South America, it has a large engineering development center and is a market with high growth potential with a vocation for new technology vehicles, in line with the predominantly clean energy matrix of the country,” said Shilpan Amin, president of GM International.

The official announcement from GM did not mention EVs but used the wording “sustainable mobility” instead.

However, in the ceremony where the investments were announced GM’s vice president for South America, Fabio Rua, said: “Our investments in Brazil are focused on sustainability. Our future is all electric,” as quoted by Bloomberg.

The automotive industry is a major global consumer of petrochemicals, and chemicals make up more than one-third of the raw material costs for an average vehicle.

The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA), among others.

($1 = R4.91)

Focus article by Jonathan Lopez